Australians are likely to drink recycled water at some point in the future, with a new report showing industry professionals overwhelmingly support reusing treated sewage to ensure supplies remain secure.
Water experts are also worried about the rise of coal seam gas, with most saying they believe CSG will pose a challenge in managing water resources.
The Australian Water Association's latest State of the Water Sector Report has found 87 per cent of industry professionals think recycled and cleaned waste water is a suitable source of drinking water.
About two-thirds of water professionals believe that Australia's water supplies and networks are well managed now.
But rising costs and ensuring future supplies are areas of concern as climate change, population growth and the need to upgrade expensive systems place pressure on the water industry.
Experts say diversifying water supplies will offer the best security.
The report, prepared by Deloitte from a survey of 1243 professionals, shows recycling waste water enjoys a higher level of support than building new dams and is second only to desalinating seawater as a favoured strategy.
Associate professor Stuart Khan, a water systems expert from the University of New South Wales and chair of the AWA water recycling network committee, said drinking recycled water is inevitable but the industry had to build public acceptance.
"The most likely scenario is that the next cities to move will be some smaller regional centres," he said.
Even big coastal cities and capitals, which have the option of desalination, are likely to eventually opt for the lower energy demands of putting recycled water directly back into water supplies, Assoc Prof Khan said.
Western Australia last year signed off on an indirect reuse scheme where treated sewage is injected into underground aquifers.
WA also uses desalination.
While desalination is almost universally accepted as a viable source of drinking water, outside WA it loses support because of its higher cost and environmental impact.
Dams won support from 84 per cent of respondents as effective for managing water security in their region but support for new dams is low.
Only 45 per cent of those surveyed supported new dams in northern Australia and 38 per cent favoured new dams in the south-east.
The federal government has drawn up a list of 30 potential new or expanded dams that it says will boost agriculture and mining in those regions.
Concern about how CSG extraction could affect ground and surface water resources remains high among water experts, with 70 per cent saying it was a moderate to significant risk.
In states most affected by CSG operations - NSW, Queensland and the ACT - 87 per cent said the industry poses a risk to water resources, with 74 per cent rating the risk as moderate to significant.